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August 16, 2013

Warren Buffett Ups Berkshire’s Wells Fargo Stake

Billionaire investor grows his share in Wells to 8.7% of the bank, making it Berkshire’s largest holding

Berkshire Hathaway Chairman Warren Buffett. (Photo: AP)

Warren Buffett added shares of Wells Fargo to Berkshire Hathaway’s portfolio for the ninth straight quarter in Q2 2013, bringing the billionaire investor’s stake in Wells to 8.7% of the bank’s stock, according to regulatory filings this week.

The investment of Berkshire (BRK.A), of which Buffett is the chairman, in Wells (WFC) now totals almost $20 billion, Bloomberg reported. The Wells stake is the largest holding in a value-focused portfolio that includes more than $15 billion in Coca-Cola Co., $11 billion in American Express and $12 billion in Buffett’s one technology sector stock, IBM.

“The Wells Fargo holding has surged by about 60% to 463.1 million shares in the five years through June 30,” wrote Noah Buhayar for Bloomberg, citing regulatory filings. “Buffett hasn’t added to AmEx and Coca-Cola since the 1990s. He built the IBM stake beginning in 2011.”

Wells Stock Up 26% in 2013

Wells Fargo stock is up 26% this year. As of June, the bank is the No. 1 small-business lender, auto lender, mortgage originator and commercial real estate originator, according to a Wells presentation at a Morgan Stanley financials conference on June 11. On the advisor side of the business, in late July the company said that it added 34 teams and some $5.4 billion in assets under management to the bank’s independent-advisor channel during the first half of 2013.

In the second quarter of 2013, Wells Fargo’s Wealth, Brokerage and Retirement unit reported revenue of close to $3.3 billion, up 10% from the year-ago period and 2% from the prior quarter, partly due to higher asset-based fees.

Buffett and his deputies also put money to work in cars, oil and satellite television in second-quarter 2013, making it Berkshire’s most heavily stock-invested quarter since 2011, The Financial Times reported. Berkshire increased its holdings in General Motors and also made new investments in Dish Network and the Canadian oil company Suncor Energy.

“The billionaire investor, for decades a proponent of the long-term attractions of stocks, made the investments in a period when the U.S. stock market surpassed its previous high set in 2007,” wrote Dan McCrum in the Financial Times. “The rising market helped push the value of Berkshire’s stock portfolio to $97 billion on Thursday, accounting for more than a third of the conglomerate’s $287 billion market capitalization.”

Berkshire’s Q2 Beats Expectations

On Aug. 2, Berkshire Hathaway reported a 46% jump in earnings for the second quarter, saying the sizable increase reflected a $322 million gain in investments and a $300 million gain in derivatives. Net earnings totaled $4.5 billion for Q2 2013, or $2,763 per share, versus $3.1 billion in Q2 2012, or $1,882 per share. Analysts’ expectations were for profits of $2,170 per share, according to Thomson Reuters.

To be sure, Berkshire’s expectation-beating second-quarter performance must be putting a smile on Buffett’s face. Earlier this year, Buffett’s letter to shareholders within Berkshire’s 2012 annual report expressed disappointment with the company’s performance last year.

“When the partnership I ran took control of Berkshire in 1965, I could never have dreamed that a year in which we had a gain of $24.1 billion would be subpar,” Buffett wrote in his 21-page letter. “But subpar it was. For the ninth time in 48 years, Berkshire’s percentage increase in book value was less than the S&P’s percentage gain (a calculation that includes dividends as well as price appreciation). In eight of those nine years, it should be noted, the S&P had a gain of 15% or more. We do better when the wind is in our face.”

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